85501 - Institutions, Culture and Economic Development

Course Unit Page

  • Teacher Paolo Zagaglia

  • Credits 12

  • SSD SECS-P/02

  • Teaching Mode Traditional lectures

  • Language English

  • Campus of Ravenna

  • Degree Programme Second cycle degree programme (LM) in International Cooperation on Human Rights and Intercultural Heritage (cod. 9237)

  • Course Timetable from Oct 04, 2021 to Dec 16, 2021

SDGs

This teaching activity contributes to the achievement of the Sustainable Development Goals of the UN 2030 Agenda.

Decent work and economic growth Reduced inequalities Partnerships for the goals

Academic Year 2021/2022

Learning outcomes

Formal institutions matter for both the long-term growth performance and the development path of a country, in that they shape the incentives of different actors in a society. Informal institutions or culture determine the rise and persistence of institutions across countries. Taken together, culture and institutions are the results of endogenous choices. They are influenced by geography, technology, epidemics, conflicts, history, as well as unexpected exogenous events. Objectives of the course are: to discuss the fundamental causes of international differences in income, to provide understanding on the role of the differences in formal institutions across developed and developing countries, to explain the impact of the interaction between institutions and culture on long-term economic change, to discuss the causes of the preferences for the redistribution of income and its relation to poverty, to provide insight on the inner incentives for innovation. The course will touch upon the following questions and topics: What are the fundamental causes of income differences among countries? Why do formal institutions differ across devoloped and developing countries? How do culture and institutions interact? How do values and beliefs affect the rise of institutions? What is the relation between preferences for redistribution of income and poverty? How to measure ‘culture’ in the context of development studies? Individualism and collectivism: what is their impact on the preferences for innovation? What role for culture in financial institutions?

Course contents

Preliminary note: this couse will held in **english** consistently with the teaching offering of our degree.

The master's degree in which this teaching is framed touches upon the topic of 'development' in a multidisciplinary way. This specific course focuses on the economic perspective of the 'development' paths typically followed by a country during its history. Various topics will be discussed.

The ideas of economic development and economic growth are strongly linked to each other. Therefore, it is natural to start by considering the following question: what determines the economic performance - in terms of income growth - of a country over the long run? In this context, the phenomenon of the 'reversal of fortunes' experienced by Latin American countries will be dealt with. This will allow us to introduce the role of 'institutions' as a determining factor for long-term economic growth.

The perspective of economic analysis proposed by the school of 'institutional economics' will be considered. Hence, we will consider the distinction between 'formal' and 'informal' institutions.

Many industrialized economies are centered around the role of markets as mechanisms for carrying economic transactions. The analysis offered by the institutional school stresses the role 'transaction cost' in the creation and emergence of markets. If markets can be created, so can institutions. Hence, what determines a society's choice for formal institutions?

The path of a country's income over time is usually characterized by a change in both the production structure and the composition of aggregate demand. Together with formal institutions - e.g., forms of public governance of private markets -, informal institutions - e.g., factors of a cultural nature - can play a role in the process of change of production structures. might be to the way in which it varies. the prevailing productive activity. This perspective provides the ground for introducing the role of cultural phenomena in the functioning of markets. For instance, we shall consider the implications of cultural differences between countries, as well as the role of differences in 'trust' between economic agents within an economic area.

The emergence or persistence over time of formal institutions can be related to pre-existing or prevailing informal institutions in a country. We can expect there to be a causal relationship between formal and informal institutions as they are observed at a given point in time. But the organizational shape that formal institutions can take - e.g. democratic forms of public governance - in a country may have an impact on the degree of confidence experienced by citizens in conducting transactions in a market context. In other words, the causal relationship between formal and informal institutions can take a two-way form. Therefore, the following question arises: what are 'institutions', at the very end? Should we think of them as the outcome of individual or collective choices? Or can should think of institutions as factors that are inherited from the past, hence persistent over time?

The term 'social capital' is often used in different contexts. We can interpret the idea of social capital as that of a form of institution that can be relevant in the process of change of local communities. Since the allocation of economic resources is key for the creation and propagation of the sources of change in a production structure, understanding the role of social capital may help us to explain how financial markets can contribute to the 'local development' of a given community. All in all, we shall discuss the idea of social capital in order to stress how difficult it may be to pin down causal relations within the process of economic development.

A 'family' can be interpreted as a form of organization of social and - therefore - economic relationships. But the formation of a family - and the emergence of the social organization that follows from it - is linked to the formal and informal institutions that characterize a country or a community. The way in which different members of a family allocate their time to explicitly-remunerated work in the labor market and to implicitly-remunerated work within the family itself tells us how family income is formed. But this means that family ties can be important in understanding how a country's labor market works. This perspective will allow us to link together the different topics covered during the course. It will also enable us to apply different perspectives of theoretical analysis to the study of empirical phenomena observed in the real world.

It should be pointed out that a clear distinction will be introduced between economic theories (about the unobservable determinants of economic phenomena) and the perspective of empirical analysis (related to what we can observe from the data and past history). The final aim will be to encourage students to identify alternative theoretical hypotheses, and to test different 'theses' on historical data.

Readings/Bibliography

All the topics discussed during the lectures are presented in a number of scientific papers that have contributed to a growing research and study agenda.

The study material for both the students who decide to attend the course, and for those who choose not to attend the lectures is made available in clearly-marked sections of the Virtuale platform before the beginning of the course. All the materials can **also** be retrieved and downloaded from the Internet.

After the course has started, the professor will provide the students with a set of slides for each lecture. These will be upgraded as the class discussion takes place, based also on feedback from the class-attending students. They will be uploaded on Virtuale and will be available also to the students who do not follow the lectures.

 

The papers in the following list provide the building blocks for the literature that will be discussed in class. They are relevant for the students who attend the lectures. Please notice that the professor may decide to include additional papers for the course-attending students as the lectures take place:

Alberto Alesina and Paola Giuliano, “Culture and Institutions”, NBER Working Paper, No. 19750, December 2013.

Daron Acemoglu and Simon Johnson, “Unbundling Institutions,” Journal of Political Economy, 113, pp. 949-995, 2005.

Daron Acemoglu, Simon Johnson, and James Robinson, “The Colonial Origins of Comparative Development: An Empirical Investigation,” American Economic Review, 91, pp. 1369-1401, 2001.

Daron Acemoglu, Simon Johnson, and James Robinson, “Reversal of Fortune: Geography and Institutions in the Making of the Modern World Income Distribution,” Quarterly Journal of Economics, 117, pp. 1231-1294, 2002.

Daron Acemoglu, Simon Johnson, and James Robinson, “Institutions as a Fundamental Cause of Long-Run Growth,” Chapter 6 in: P. Aghion and S. Durlauf (eds.), Handbook of Economic Growth, Vol. 1A, pp. 385–472, 2005.

Douglas C. North, “The Role of Institutions in Economic Development”, United Nations Economic Commission for Europe, Discussion Paper Series, No. 2003.2, October 2003.

Gani Aldashev and Jean-Philippe Platteau, “Religion, Culture, and Development”, in Handbook of the Economics of Art and Culture, vol.2, eds. V. Ginsburgh and D. Throsby, Elsevier, pp. 587-631, 2014.

Gani Aldashev, “Legal Institutions, Political Economy, and Development”, Oxford Review of Economic Policy, 25(2), pp. 257-270, 2009.

Marcus Noland, “Religion, Culture, and Economic Performance”, Institute for International Economics Working Paper 03-8. Washington: Institute for International Economics, 2003.

Paul Milgrom, Douglas North, and Barry Weingast, “The Role of Institutions in the Revival of Trade: The Law Merchant, Private Judges, and the Champagne Fairs,” Economics and Politics, 2: 1-23, 1990.

Paola Giuliano and Alberto Alesina, “Family Ties and Political Participation”, Journal of the European Economic Association, 9 (5), pp. 817-839, October 2011.

Timur Kuran, “Islam and Underdevelopment: An Old Puzzle Revisited”, Journal of Institutional and Theoretical Economics, 153:1, pp. 41–71, March 1997.

 

The following list includes all the study material for the students who do not attend the lectures. Please notice that they can be obtained from a clearly-marked section on Virtuale. The Virtuale thread includes also a reader's guide. Here below the non-attending students will find also download links from the Internet after each paper:

1- The role of institutions in economic development, by Douglas North, Discussion Paper No. 2003.2, United Nations Economic Commission for Europe

(http://www.unece.org/fileadmin/DAM/oes/disc_papers/ECE_DP_2003-2.pdf)

2- Understanding China's economic performance, by Jeffrey D. Sachs and Wing Thye Woo, NBER Working Papers 5935, National Bureau of Economic Research, Inc.

(https://ideas.repec.org/p/nbr/nberwo/5935.html)

3- Paths of Institutional Development- A View from Economic History, by Karla Hoff, The World Bank Research Observer 18(2):205-226

(https://www.researchgate.net/publication/5217938_Paths_of_Institutional_Development_A_View_from_Economic_History)

4- Institutions as a fundamental cause of long-run growth, by Daron Acemoglu, Simon Johnson and James Robinson, NBER Working Papers 10481, National Bureau of Economic Research, Inc.

(https://www.nber.org/papers/w10481)

5- Coordination Failures, Poverty Traps, Big Push Policy and Entrepreneurship, by Bogdan Glavan, MPRA Paper 5757, University Library of Munich, Germany.

(https://ideas.repec.org/p/pra/mprapa/5757.html)

6- Capability Traps in Development, by Lant Pritchett, Michael Woolcock, and Matt Andrews, PRISM 3, No. 3, June 2012

(https://ciaonet.org/record/25977)

7- The State of Food Insecurity in the World, FAO, 2012

(http://www.fao.org/3/i3027e/i3027e.pdf)

8- Culture and institutions, by Alberto Alesina and Paola Giuliano, NBER Working Papers 19750, National Bureau of Economic Research, Inc.

(https://www.nber.org/system/files/working_papers/w19750/w19750.pdf)

9- Religion, Culture and Development, by Gani Aldashev and Jean-Philippe Platteau, Handbook of the Economics of Art and Culture, Volume 2, Chapter 21, 2014

(https://www.sciencedirect.com/science/article/pii/B9780444537768000210)

10- Role of Gender Equality in Development, by Anne Mikkola, unpublished, University of Helsinki

(https://papers.ssrn.com/sol3/papers.cfm?abstract_id=871461)

11- Gender equality in development, by Esther Duflo, Bread Policy Paper No. 11

(https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=&cad=rja&uact=8&ved=2ahUKEwjWzeqjyfnxAhUMyYUKHbRrCwcQFjAAegQIBRAD&url=https%3A%2F%2Fciteseerx.ist.psu.edu%2Fviewdoc%2Fdownload%3Fdoi%3D10.1.1.85.6923%26rep%3Drep1%26type%3Dpdf&usg=AOvVaw3fHP4zr7kU8_9ObrNE2SUR)

12- The economics of social capital, by Partha Dasgupta, Economic Record, Vol. 81, No. S1, pp. S2-S21, August 2005

(https://papers.ssrn.com/sol3/papers.cfm?abstract_id=783228)

13- Thinking socially, World Development Report 2015: Mind, Society, and Behavior, Chapter 2

(https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=&cad=rja&uact=8&ved=2ahUKEwjcm5CTyvnxAhXI3oUKHUzuBCIQFjALegQIBxAD&url=http%3A%2F%2Fwww.worldbank.org%2Fcontent%2Fdam%2FWorldbank%2FPublications%2FWDR%2FWDR%25202015%2FChapter-2.pdf&usg=AOvVaw2gSvMggxcUMlWQF_5OU1Bq)

14- Economic causes of war and peace, by Jon D. Wisman, in Encyclopedia of Violence, Peace and Conflict, December 2008

(https://www.researchgate.net/publication/281069002_The_Economic_Causes_of_War_and_Peace)

Teaching methods

The course will consist in a set of standard lectures.

The classes will provide the opportunity both to facilitate the interaction between the lecturer and the students, and to stimulate the debate among students themselves. In this sense, class attendance is critical to take full advantage from an in-depth discussion on the course topics.

Assessment methods

A distinction is made between the students who attend at least 80% of the lectures of the course (i.e. attending student), and those students who do not (non-attending students).

 

* Non-attending students will take a standard written exam with questions on the study material. Exam dates will be scheduled in order to span the entire academic year. Each exam session will last 3 hours. The study material is based on the articles listed above under the section 'Readings/Bibliography'. Please notice that these articles can be downloaded from a clearly-marked thread designed for non-attending students on Virtuale. The grading criteria are explained here below.


* Attending students will take 2 mid-term exams and a final examination based entirely on the papers and slides discussed during the lectures. Please notice that this material may be different from the compulsory readings for the non-attending students. All the exams - both midterms and final - will take place in written form. During the midterms, students will be asked to provide answers to short questions about topics covered during the lectures. The first midterm exam will cover only the material discussed during the first 7 lectures. The second midterm will be based only on the material presented in class from lecture number 8 to lecture number 14. Each midterm exam will last 1.5 hours.

In the third and final part of the examination, attending students will be asked to write a short opinion piece on a statement that is relevant for the course. All the available resources - whether online or in printed form - may be used while preparing the piece. The students will have up to 1.5 hours to finalize the opinion piece.

The final grade for attending students will consist in the sum of the points obtained from the two midterms and the opinion piece. Each midterm will contribute to the final grade by 15 points at most. The opinion piece will deliver 5 points at most. For example, a final score of 32 points will turn into a grade of 30 cum laude. A final score of 16 points shall imply that a student has not passed the examination.

The study material (papers + lecture slides) for the course-attending students will be made available in clearly-marked threads on the Virtuale page of the course. They will be uploaded before the beginning of the course. However, please notice that they may be modified/upgraded in due time as the lectures take place. Timely information about any change/upgrade will be provided to the students who attend the course.

 

Grading criteria for the written exam of non-attending students

The written exam will be based on answers to 6 questions. The final grade will consist of the sum of the grading points obtained for each answer.

The grading criteria for each answer are the following:

  • consistency (i.e., whether an answer does reply to the specific question at hand)
  • relevance (i.e., how deeply an answer addresses the core point of a question)
  • completeness (i.e., whether all the important points are discussed by an answer)
  • logic (i.e., whether an answer outlines the reasoning that stands behind it, or why a certain answer is provided)

A deep understanding of the topic, evidence of critical reasoning, an effort to discuss the relevant aspects of a topic and to explain the economic intuition will lead to a final mark within the range 5-6 points for an answer.

A demonstration of mild understanding about the question topic, along with a unsatisfactory evidence of logical reasoning limited efforts to discuss both the relevant aspects of a topic, and to explain the economic reasoning will be evaluated with a mark in the range of 3-5 points for an answer

A limited understanding of the question topic, coupled with below-average logical skills, inconsistent efforts both to discuss the relevant aspects of a topic and to explain the economic reasoning will lead to a mark in the range of 1-2 points for an answer.

Evidence of a complete lack of understanding about the topic, inadequate logical skills and the demonstration that there are no efforts to discuss the relevant aspects of a topic will lead to a 0 point mark for an answer.

 

Grading criteria for both the midterm exams and the opinion piece of attending students

Each midterm exam will include 5 questions. Written answers will be provided by the students on all the questions.

The opinion piece will include a statement by the professor. A comment on the statement will be required. No limit on the number of pages will be imposed. The student may use any material in order to prepare the piece. In short: the opinion piece will provide the  students with an opportunity to apply to a specific case all the scientific theories, ideas and notions discussed during the course.

The grading criteria are as follows:

  • consistency:

    do the answers provided in a midterm exam address the questions at hand? Or do they tackle questions that are not asked in the midterm?

    does the opinion piece address the core scientific point of a statement in a final examination?

  • relevance:

    how deep does the student go into addressing the questions of a midterm exam? Does the student provide answers that elaborate critical answers?

    how deep does the student go while tackling/arguing about the key point of a statament? Does the student discuss all the assumptions that he/she introduces in his/her opinion piece?

  • logic:

    is there a reasoning behind the answers to the questions in a midterm exam? How carefully is that spelled out and explained?

    does the text of the opinion piece explain the reasoning behind the comment that a student proposes? How sound is that reasoning based on the study material covered during the course?

Evidence of substantial understanding of the topics touched upon, evidence of critical reasoning, an effort to explain the economic intuition will lead to a mark within the range 4-5 points for the final examination and within the range 12-15 points for each midterm exam.

A demonstration of mild understanding about the questions or statement topic, mildly-satisfactory evidence of logical reasoning, limited efforts to explain the economic intuition developed by the student will be evaluated with a mark within the range 2-3 points for the final examination and within the range 7-11 points for each midterm exam.

A limited understanding of the question topic coupled with below-average evidence of application of logical skills, inconsistent efforts either to discuss the relevant aspects of a topic or to explain the economic reasoning will deliver 1 point for the final examination and a mark within the range 1-6 points for each midterm exam.

Evidence of a complete lack of understanding about the topic, inadequate logical skills and the demonstration that there are no efforts to discuss the relevant aspects of a topic or a question will lead to a 0 point mark both in the midterm and in the final part of the exam.

 

General questions

Can a student attend the course and take the exam as a non-attending student? YES.

Is writing the opinion piece compulsory for all the attending students? YES.

Can a student obtain a negative number of points on the piece? NO.

Can a non-attending student obtain a negative number of points on the answers for a written exam? NO.

For any questions or comments, please do not hesitate to contact the professor.

Teaching tools

The students who attend the course will be provided with a 'paper pack' including all the scientific articles, and set of slides for each lecture topic.

These materials will be made available on the Virtuale page for the course.

Office hours

See the website of Paolo Zagaglia